Crisis in political alliance imperils reform drive in Mexico

A vaunted three-party alliance that sustains President Enrique Pena Nieto’s drive to enact major changes in Mexico is severely fraying, casting a shadow over pending overhauls in tax collection, finance and energy production.

A vaunted three-party alliance that sustains President Enrique Pena Nieto’s drive to enact major changes in Mexico is severely fraying, casting a shadow over pending overhauls in tax collection, finance and energy production.

Pena Nieto’s office Tuesday abruptly postponed announcement of sweeping new financial measures because of the crisis in the alliance, known as the Pact for Mexico, which was forged in December and ties Pena Nieto’s Institutional Revolutionary Party with two other parties, one from the political left and the other from the right.

The current crisis centers on whether Pena Nieto’s PRI is using a federal hunger-fighting program to gain political advantage as 14 of Mexico’s 31 states prepare for elections later this year.

The financial package that Pena Nieto was scheduled to announced is intended to ease credit for businesses and lower interest rates while increasing tax revenues to the federal government.

Instead, Pena Nieto deployed top aides to try to make peace with the National Action Party on the right and Party of the Democratic Revolution on the left.

Finance Minister Luis Videgaray denied that the postponement meant the end of the financial reform plans.

“The financial reform is not in danger,” Videgaray told a local radio station. “What matters is that the president has sent a very clear message that the priority is to listen and take what is happening in all seriousness.”

The three parties signed the Pact for Mexico on Dec. 2, agreeing in broad terms to seek 95 reforms during Pena Nieto’s six-year term. The agreement was seen as a major alliance that could overcome entrenched interests, such as business monopolies and unions, which oppose some of the changes.

Pena Nieto reaped almost immediate success, pushing through an education reform law in December that took away from the powerful teachers’ union the right to hire and fire teachers. In mid-March, he announced a sweeping revamp of the telecommunications and broadcasting industries intended to end the monopolies that control them. That reform is wending its way through the Senate.

Pena Nieto’s office said that the 46-year-old president would “spare no effort to ensure that the Pact for Mexico remains an effective instrument of change.”

It added that Pena Nieto had suspended all acts related to the Pact for Mexico to ensure “frank dialogue to overcome disagreements.”

Upcoming elections for mayors and state legislators (and one governor’s race) in 14 states on July 7 has caused tension in the political sphere, but the spark for the current crisis focuses on Social Development Secretary Rosario Robles and an ambitious program, Crusade Against Hunger, to help 7.4 million Mexicans in extreme poverty.

Both major opposition parties accused Robles last week of using funds from the crusade to reap votes in the upcoming elections.

The National Action Party went further, filing a formal complaint against Robles, Veracruz Gov. Javier Duarte and 56 officials for improper use of public money.

In response, Robles fired six employees of the program and suspended a seventh even as she denied that funds would be spent with a political purpose.

Since then, charges and countercharges have only spiked. Ruling party deputies in Congress Tuesday held a news conference to release tapes that they said provide “forceful proof” that the National Action Party used funds from a cash-transfer program known as Oportunidades (opportunities) to win votes in 2012.

If the Pact for Mexico were to fray further, Pena Nieto would face difficulty in getting reforms through Congress, requiring his party to horse trade issue by issue.

The biggest upcoming reform would shake up Petroleos Mexicanos, the state oil and gas monopoly, although it isn’t yet known the extent of the proposal, such as whether it would open up the energy markets to competition or simply allow Pemex to enter into alliances with private oil companies. Either change would require a constitutional amendment.